A Building Boom Amid Rising Prices
Nashville’s real estate market is experiencing a surge in development, with cranes dotting the skyline and builders scrambling to keep up with demand. Despite higher interest rates, elevated home prices, and a national economic slowdown, the city’s building boom remains in full swing. This transformation can be traced back to the period following the 2008 financial crisis, when Nashville became a desirable alternative for those seeking a more affordable urban experience. The influx of new residents, particularly those from coastal cities, has driven a steady increase in home prices and construction activity.
John Eldridge, CEO of E3 Construction Services, which has been building in Nashville since 2008, attributes the city’s boom to a steady flow of buyers seeking cheaper housing. He emphasizes that Nashville’s real estate market has seen substantial growth, particularly in single-family home construction. In fact, construction permits for single-family homes in 2015 jumped nearly 25%, a rate three times higher than the national average. Yet, Eldridge says, the demand continues to outstrip supply, with no homes currently available that are completed but not sold.
Housing Affordability Takes a Hit
While the building boom has been a boon for Nashville’s economy, it has also led to a sharp decline in housing affordability. Home prices in the city have risen 55% since the pandemic, significantly outpacing the 47% national increase. In 2023, it now takes 44% of the median household income in Nashville to afford a median-priced home, well above the historical average of 23%.
This surge in prices has left many long-time residents, like special education teacher Madison Cartularo, struggling to afford housing. Cartularo, who moved to Nashville from New York, noted that rents had been increasing steadily, forcing her to pay around $1,600 per month for a downtown studio apartment—nearly half of her paycheck. With housing becoming increasingly unaffordable, Cartularo finds herself relying on a second job to make ends meet.
Commercial Growth and Challenges
Despite the struggles in the residential market, Nashville’s commercial real estate sector remains active. The city’s business landscape is diversifying beyond its iconic music industry, attracting a mix of professional services, law firms, banks, and tech companies. Janelle Gallagher of CBRE in Nashville points to the 15% increase in office space supply over the past four years, even as other cities face challenges with office vacancy rates.
However, the rapid growth has led to significant traffic congestion, a concern for both residents and developers. While investments in water and sewer infrastructure are ongoing, transportation developments have lagged behind. Governor Bill Lee signed the Transportation Modernization Act into law in April 2023, earmarking $3.3 billion to address the state’s growth needs, including improvements to Nashville’s transportation system.
Conclusion: Nashville’s Booming Economy and Growing Pains
Nashville’s economy continues to thrive, fueled by a booming real estate market and an influx of businesses and residents. However, this rapid growth comes with challenges, particularly in terms of affordability and infrastructure. The city’s housing prices and rents have escalated to levels that many residents find unsustainable, while traffic congestion and other growing pains highlight the challenges of keeping pace with such rapid expansion. As Nashville continues to evolve into a major business hub, addressing these issues will be key to maintaining its success and livability in the coming years.